Keeneland Sale: More market confidence in 2012?

The past year may not be one that is remembered all that fondly, but in the bloodstock world it is hoped 2011 will be looked back on as the year things finally started to turn around.

It is no secret that Thoroughbred auctions fell apart during the latter part of 2008 and have struggled to recover. A deadly combination of worldly economic woes and supply outstripping demand left many in the industry reeling.

Finally though, things are starting to look up. From power auctions to smaller regional sales, many posted increases in 2011.

“I think it has been a positive year for the bloodstock industry in regards to the sales,” said Peter O'Callaghan of Woods Edge Farm. “Plenty of the 2-year-old consignors made money this year and got a lot of their stock sold. That was a good way to start the year, and it set a good precedent.”

By the end of the year, there was a quiet confidence in the marketplace. Keeneland's November mixed sale is the last major auction on the North American calendar, and it saw its gross increase by 41% from 2010.

However, some unique factors contributed to the success of that sale, specifically the dispersals of Prince Saud bin Khaled and Edward Evans' stock.

“November was very strong for the weanlings and very elite mares from real deep families,” said O'Callaghan. “Every time the Breeders' Cup is in Kentucky, it gives the November sale a lift. Then you added in the dispersals. Every seller around the world was interested. I am not saying it was a false economy but the dispersals really drove that sale through the roof.”

Curious creatures that we are, it is not enough to accept things are better. We also want to know why. As it relates to the bloodstock market, several answers pop up again and again.

For starters, a focus on what is–and isn't–being bred has played a large part in righting the supply and demand ship. According to Jockey Club projections, the estimated foal crop for 2012 will be the smallest since 1971.

“The first thing is the fact that our supply is meeting demand,” said Carrie Brogden of Machmer Hall. “People are being a lot more careful with the mares they breed. You are seeing a lot of professionals who really understand their mares and what their mares match with.”

The harsh reality is that some operations could not weather the storm, and those that are still left standing are shrewd individuals.

“The people who are selling now are so well educated and so well informed about the game,” said O'Callaghan. “The biggest challenge breeders face is trying to breed that horse that makes the cut for all of these people.”

That isn't to say newcomers are not making their way in the bloodstock industry, just that they have to be savvy.

For instance, although Tat Yakutis McCabe has been involved in the industry for a long time, her Yakutis Enterprises did not expand into Thoroughbred consignments until 2006. By being selective about what auctions she sells out of, McCabe's company has survived through the last few turbulent years.

“I haven't over-leveraged myself right out of the business,” said McCabe, who sells exclusively at Barretts. “We are chugging along quietly and every sale has gotten better.

“Being a regional agent is a little tricky. I feel as though we are an island out here in the Pacific time zone. I don't think we are in a recovery yet out here because our cost of doing business is so high, but I am seeing a glimmer of hope.”

Changes on the racing front have also done their part to turn the tide. Taken as a whole, stud fees have gone down and purses have ticked up. Additionally, New York made a big splash when it installed video lottery terminals at Aqueduct and announced 50% across the board increases for the state's breeders' awards for 2012.

“I think the positive things on the racing front are a big influence,” said O'Callaghan. “I think there is more confidence. People know where they stand and feel like they can go on and start trading again.”

Of course, it is only when the world economy as a whole is back on steady ground that everyone will truly be able to breathe easy.

“Before, you were flinching, waiting to be knocked down again,” said Brogden. “Now my only fear is that there is a cataclysmic economic meltdown involving Europe. If that happens we are all screwed anyway.”

***

This article was originally featured in the Jan. 9 Paulick Report Special distributed exclusively at the Keeneland January Sale. Click here to view a PDF version of the publication.